Carter v. National City Mortgage, Inc.

Filing 40

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS, AND DISMISSING WITH PREJUDICE COUNTS I AND II: It is ORDERED that the Court grants in part and denies in part PNC's 22 Motion for Judgment on the Pleadings and dismisses with prejudice Carter's claims under the WVCCPA (Count I) and his negligence claim (Count II). Carter may proceed on his claims for tortious interference with contract (Count III), estoppel (Count IV), and fraud (Count V). Count VI remains viable. Signed by District Judge Irene M. Keeley on 3/3/15. (cnd)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

TIMOTHY W. CARTER,
Plaintiff,
v.

//

CIVIL ACTION NO. 1:14CV70
(Judge Keeley)

NATIONAL CITY MORTGAGE, INC.,
now known as PNC Mortgage, Inc.,
Defendant.

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS [DKT. NO. 22],
AND DISMISSING WITH PREJUDICE COUNTS I AND II
Pending before the Court is the motion for judgment on the
pleadings (dkt. no. 22) filed by the defendant, National City
Mortgage, Inc. n/k/a PNC Mortgage, Inc. (“PNC”).

For the reasons

that follow, the Court GRANTS IN PART and DENIES IN PART PNC’s
motion.
I. FACTUAL BACKGROUND
The following facts are viewed in the light most favorable to
the non-movant.
loan

service

This case arises out of dealings between PNC, a

provider,

and

the

plaintiff,

Timothy

W.

Carter

(“Carter”), who, in 2009, borrowed $186,631 to purchase a home in
Martinsburg, West Virginia. Carter alleges that, after he was laid
off and was unable to make payments on the loan, PNC “stonewalled”
his request for loss mitigation alternatives to foreclosure.

He

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
contends that PNC’s misconduct during the pendency of his request
increased his arrears to an unaffordable level.
A.

PNC’s Alleged Misconduct
In 2009, Carter, a construction worker, applied for a loan

through

the

(“SFHGLP”)

Single

Family

administered

Agriculture (“USDA”).

by

Housing
the

Guaranteed

United

States

Loan

Program

Department

of

The USDA provides a 90% loan note guarantee

for lenders who participate in the SFHGLP.

Carter obtained a

$186,631 loan through Shenandoah Mortgage, LLC (“Shenandoah”),
which immediately transferred the servicing rights on the loan to
PNC. Apparently, Shenandoah bundled Carter’s loan with others into
a mortgage-backed security, which Carter alleges is now held by
GNMA I Pool Processing.1
Carter and his wife made timely and complete payments on the
loan for more than two years until 2011, when Carter was laid off
by his construction company.
unemployment

benefits,

mortgage payments.

Because of a delay in his receipt of

Carter

fell

two

months

behind

in

his

After he began receiving his benefits, he

resumed making payments and contacted PNC to obtain a plan that

1

Despite Carter’s allegation, it is worth noting that “Ginnie Mae
does not buy or sell loans.” See http://ginniemae.gov/pages/default.aspx.

2

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
would bring his account current.2

PNC told Carter to submit

documentation of his finances to be evaluated for loss mitigation
alternatives to foreclosure.

Importantly, PNC further advised him

not to make any additional payments until it provided him with an
alternative

to

foreclosure,

such

as

a

forbearance

agreement,

repayment plan, or a loan modification.
Between May 2013 and early 2014, PNC made multiple requests
for Carter’s financial documentation, which he provided each time
it was requested.

During the same period, PNC also instructed

Carter on multiple occasions not to make additional payments while
it processed his request for a loss mitigation alternative to
foreclosure.
In

August

2013,

Carter

submitted

a new

request

to

PNC,

advising that he was once again employed and no longer relying on
unemployment

benefits.

PNC

acknowledged

receipt

of

his

new

request, but told him that he had failed to submit the necessary
documentation. Carter contends that he, in fact, had submitted the
required paperwork.

Nevertheless, in September 2013, he re-

submitted all the requested documentation, following which, on

2

The complaint does not allege when Carter first contacted PNC
about foreclosure alternatives.

3

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
October 28, 2013, PNC denied his request for any loss mitigation
alternatives to foreclosure.
B.

Bankruptcy and Foreclosure
On May 14, 2013, Carter and his wife filed a petition for

bankruptcy under Chapter 7 of the United States Bankruptcy Code, 11
U.S.C. § 701, et seq.

According to his statement of financial

affairs attached to his petition, he owed $175,000 on the mortgage
loan at the time he filed for bankruptcy.

Of significance to this

case, Carter did not list any contingent claims against PNC on his
schedule of assets; however, he did assert his intention to retain
his house while making regular payments on the loan.
On August 27, 2013, the Honorable Patrick M. Flatley, United
States Bankruptcy Judge, granted Carter a discharge pursuant to 11
U.S.C. § 727, which automatically stayed any foreclosure by PNC on
Carter’s home.

See 11 U.S.C. § 362(a).

On January 16, 2014,

however, the parties to the bankruptcy proceeding signed –- and the
bankruptcy court entered –- an agreed order granting relief from
the automatic stay of the foreclosure proceedings.

The order

stated, in relevant part, that “[Carter] has indicated an intent to
surrender the real property with an address of 5 Pochards Court,
Martinsburg, West Virginia.”
4

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
PNC scheduled a foreclosure sale of Carter’s home for March
18, 2014, but canceled it when Carter filed this lawsuit the day
before

the

petitioned

scheduled
the

proceeding.

sale.

bankruptcy

Then,
court

on
to

July
reopen

1,

2014,

his

Carter

bankruptcy

With no objection from PNC, Judge Flatley granted

Carter’s petition.
II. PROCEDURAL BACKGROUND
On March 17, 2014, Carter filed a complaint in the Circuit
Court of Harrison County, West Virginia, seeking damages and an
injunction to prevent foreclosure.

Count I asserts a violation of

the West Virginia Consumer Credit and Protection Act (“WVCCPA”), W.
Va. Code § 46A-1-101, et seq., specifically §§ 46A-2-127 and 46A-2128, prohibiting the use of “fraudulent, deceptive or misleading
representation[s] or means to collect or attempt to collect claims
or to obtain information concerning consumers,” as well as “unfair
or unconscionable means to collect or attempt to collect any
claim.”

Count II alleges negligence arising from a “special

relationship” between PNC, the loan servicer, and Carter, the
obligor on the loan note.

Count III alleges that PNC tortiously

interfered with the contract between Carter and the loan holder.
Count IV asserts estoppel to prevent PNC from foreclosing on
5

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
Carter’s home.
instructing

Count V alleges that PNC committed fraud by

Carter

not

foreclose on the home.

to

make

payments

while

intending

to

Finally, Count VI alleges an alternative

claim for breach of contract that Carter would pursue only if
discovery reveals that PNC is the loan holder and thus a party to
the contract.
PNC removed Carter’s complaint to this Court on November 18,
2014.

Although it filed a motion to change venue, PNC failed to

file an answer to the complaint.
to state court.

Carter moved to remand the case

After the Court denied both of these motions, PNC

filed a motion to dismiss, pursuant to Fed. R. Civ. P. 12(b)(6).
In response, Carter noted that PNC’s responsive pleading was filed
out of time, but acknowledged his own failure to file a notice of
default.

At oral argument, the parties agreed that PNC could

answer Carter’s complaint, and the Court then converted PNC’s
motion to dismiss to a motion for judgment on the pleadings under
Fed. R. Civ. P. 12(c).
In its motion, PNC contends as follows: (1) that Carter cannot
bring a claim under the WVCCPA because, as a result of his
bankruptcy discharge, he is no longer a “consumer”; (2) that
Carter’s negligence claim fails as a matter of law because PNC owed
6

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
him no cognizable duty; (3) that Carter’s fraud claim fails because
it is not pled with the requisite particularity; (4) that Carter is
judicially estopped from bringing any claims against PNC because,
in his bankruptcy proceeding, he failed to list such claims on his
schedule of assets, and ultimately surrendered the home to PNC; and
(5) that Carter lacks standing to bring any claims against PNC
because such claims pre-date his bankruptcy petition, and therefore
now belong to the bankruptcy estate.

The motion is fully briefed

and ripe for review.
III. STANDARD OF REVIEW
Rule 12(c) provides that, “[a]fter the pleadings are closed –but early enough not to delay trial –- a party may move for
judgment on the pleadings.”

The standard of review for Rule 12(c)

motions is the same standard applied to Rule 12(b)(6) motions to
dismiss.

See Independence News, Inc. v. City of Charlotte, 568

F.3d 148, 154 (4th Cir. 2009).

The only difference between a Rule

12(c) motion and a Rule 12(b)(6) motion is timing.

See Burbach

Broad. Co. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir.
2002) (“Because Elkins’ answer had been filed, the pleadings were
closed at the time of the motion.

Thus, we construe the motion as

one for judgment on the pleadings. However, the distinction is one
7

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
without a difference, as we . . . apply[] the same standard for
Rule

12(c)

motions

as

for

motions

made

pursuant

to

Rule

12(b)(6).”).
“A motion to dismiss under Rule 12(b)(6) tests the sufficiency
of

a

complaint;

importantly,

it

does

not

resolve

contests

surrounding the facts, the merits of a claim, or the applicability
of defenses.”

Republican Party of N.C. v. Martin, 980 F.2d 943,

952 (4th Cir. 1992).
a

district

court

In reviewing the sufficiency of a complaint,

“‘must

accept

as

true

allegations contained in the complaint.’”

all

of

the

factual

Anderson v. Sara Lee

Corp., 508 F.3d 181, 188 (4th Cir. 2007) (quoting Erickson v.
Pardus, 551 U.S. 89, 94 (2007)).
Although a complaint does not need to contain detailed factual
allegations, a plaintiff’s obligation to provide the grounds of his
entitlement to relief requires more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action
will not do.

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

Indeed, courts “are not bound to accept as true a legal conclusion
couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265,
286 (1986).

“To survive a motion to dismiss, a complaint must

contain sufficient factual matter, accepted as true, to ‘state a
8

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
claim to relief that is plausible on its face.’”

Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
IV. DISCUSSION
A.

Judicial Estoppel
To defeat the entirety of Carter’s complaint, PNC contends

that the doctrine of judicial estoppel bars his claims because he
has taken inconsistent positions in two respects.

First, after

representing to the bankruptcy court that he had no claims against
PNC by failing to list any on his schedule of assets, he has since
asserted those claims in his complaint. Second, after representing
to the bankruptcy court that he intended to surrender his home to
PNC, he now seeks to enjoin PNC from foreclosing on the home.
Carter’s response emphasizes that PNC’s alleged misconduct
occurred after he filed his bankruptcy petition, and thus his
claims were properly excluded from his schedule of assets and not
required to be added by way of supplement.
1007(h); 11 U.S.C. § 541(a)(5).
current

intent

to

retain

his

See Fed. R. Bankr. P.

Carter also contends that his
home

and

make

payments

is

not

inconsistent because he stated as much in his bankruptcy petition.
Finally, since his bankruptcy proceeding has been reopened, Carter
intends

to

“include

post-petition
9

claims

and

correct

the

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
unsupported finding [of Carter’s intent to surrender the house to
PNC] in the Agreed Order lifting the automatic stay.”

(Dkt. No. 25

at 17).
Based on Carter’s intent to strike from the bankruptcy record
the allegedly unfounded statement regarding his surrender of the
home, PNC cannot prevail on its judicial estoppel argument as to
that representation.3

Furthermore, judicial estoppel does not

apply to any post-petition claims alleged in the complaint because
Carter’s representations in the bankruptcy proceeding did not
involve any post-petition claims.

To the extent Carter alleges

misconduct by PNC prior to the filing of his bankruptcy petition,
however, he is estopped from asserting such claims in this case.
Not only did he fail to list such claims on his schedule of assets
at the time of filing, but he also failed to include them by way of
supplement. Most importantly, Carter has represented to this Court
that “his allegations arise out of post-petition conduct.”

Id. at

16.

3

If, after discovery has closed, Carter’s representation remains
in the bankruptcy record, PNC may renew this argument on summary
judgment.

10

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
B.

Standing
PNC also contends that Carter lacks standing to assert any

claims against it because such claims belong to the bankruptcy
estate.

Indeed, Carter has reopened his bankruptcy proceeding,

which makes it likely that his claims are listed on the new
schedule of assets, and therefore would belong to the bankruptcy
estate. However, because the Court lacks any verification of that,
for now, the claims remain post-petition assets not subject to the
bankruptcy proceeding initiated on May 14, 2013.

See In re

Andrews, 80 F.3d 906, 910 (4th Cir. 1996) (explaining that 11
U.S.C. § 541(a) “allows the debtor to exclude from his estate any
[assets] he might earn after the date of petition”).
Moreover, even if the claims are included in the new schedule
of assets, the parties do not anticipate that any recovery will
exceed Carter’s bankruptcy exemptions.

In such circumstances, the

law generally considers legal claims to remain an asset of the
debtor-plaintiff rather than of the bankruptcy estate.

See, e.g.,

In re Combs, A.P. No. 03-5043 (Bankr. S.D.W. Va. Oct. 20, 2004)
(order denying motions to dismiss).

PNC concedes that this issue

cannot be resolved until it is known whether the estate will

11

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
prosecute the claims.

(Dkt. No. 27 at 12).

PNC’s standing

argument, therefore, is better suited for summary judgment.
C.

WVCCPA
PNC argues that Carter’s bankruptcy discharge foreclosed his

opportunity to bring a claim under the WVCCPA inasmuch as it
removed him from the class of individuals entitled to statutory
standing.

In

his

response,

Carter

argues

that

he

possessed

statutory standing at the time of PNC’s alleged misconduct, and
therefore is entitled to sue under the WVCCPA within the prescribed
one-year limitations period.4
The WVCCPA provides a cause of action to a “consumer” to
recover damages for a creditor’s violations.

§ 46A-5-101(1).

A

“consumer” is defined as “any natural person obligated or allegedly
obligated to pay any debt.”

§ 46A-2-122(a).

On August 27, 2013,

the bankruptcy court discharged Carter’s obligation to pay the debt
owed on his mortgage loan.

Thus, when Carter filed suit on

March 17, 2014, he was not a consumer relative to PNC under the

4

Pursuant to § 46A-5-101(1), “no action pursuant to this subsection
may be brought more than one year after the due date of the last
scheduled payment of the agreement.”

12

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
WVCCPA.5

Carter, however, contends that he “still has up to one

year after the date of discharge to bring his claims arising out of
conduct that occurred when he was a so-called consumer.” (Dkt. No.
25 at 9).
Another court within this district has discussed the issue of
statutory standing under the WVCCPA.

In Fabian v. Home Loan Ctr.,

Inc., No. 5:14CV42, 2014 WL 1648289, at *5-6 (N.D.W. Va. Apr. 24,
2014) (Bailey, C.J.), the plaintiffs, who had borrowed money for a
mortgage, filed for bankruptcy and received a discharge of their
debt in 2010.

In 2013, they filed a claim under the WVCCPA against

the loan originator

and

the

loan holder

for

violations

allegedly occurred prior to their bankruptcy discharge.

that

The loan

originator moved to dismiss the claim, arguing that, because the
“plaintiffs’ personal obligation to repay their [mortgage loan]
debt was discharged in bankruptcy, plaintiffs are excluded from the
[WVCCPA’s] definition of ‘consumer,’ depriving them of standing
under the [WVCCPA’s] terms.”

Fabian, 2014 WL 1648289 at *5.

The court agreed and concluded that, once the plaintiffs
received a bankruptcy discharge for their mortgage loan debt, they
5

Notably, the parties have not addressed the effect, if any, of the
reopening of Carter’s bankruptcy proceeding on his statutory standing
under the WVCCPA.

13

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
no longer were “consumers” under the WVCCPA, and therefore lacked
standing to bring a claim under the Act.

Chief Judge Bailey

explained: “Plaintiffs have failed to demonstrate that they are
allegedly

obligated

Consequently,

to

plaintiffs

pay

within

lack

the

standing

meaning
to

bring

of

the

their

Act.

WVCCPA

unconscionability claim, as they are not ‘consumers’ within the
meaning of § 46A-2-122(a).”

Id. at *6.

Notwithstanding the holding in Fabian, Carter presents an
argument that was not addressed in that case.

He seizes on the

statute of limitations, which permits the bringing of a cause of
action within one year after “the due date of the last scheduled
payment of the agreement,” § 46A-5-101(1), and urges that his
bankruptcy discharge is an analogous event. He contends that, so
long as his complaint was filed within one year of receiving a
bankruptcy discharge, standing is not an issue.
The Court is unpersuaded by the argument that the passing of
the date of the last scheduled payment on a loan and a bankruptcy
discharge are analogous events.

The latter relieves the debtor of

any obligation to make additional payments on the loan, and thereby
removes him from the class of persons entitled to sue.

The former

does not relieve the debtor of any obligation; its only function is
14

CARTER v. PNC MORTGAGE, INC.

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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
to trigger the limitations period. Therefore, Carter’s argument is
unavailing; his bankruptcy discharge foreclosed the possibility of
his filing suit against PNC under the WVCCPA.
D.

Negligence
Count

II

of

Carter’s

complaint

alleges

that

PNC

acted

negligently by “instructing [Carter] not to make payments, advising
[Carter] that it would provide him with assistance to keep his
home, and then instead allowing arrears to accrue for years and
ultimately denying [Carter] for assistance without adequately and
properly considering [Carter] for loss mitigation alternatives to
foreclosure, and pursuing foreclosure.”

(Dkt. No. 1-1 at 8).

As

a result, Carter alleges that he “accrued arrears that made it
impossible for [him] to reinstate his loan.”

Id. at 9.

In its

motion, PNC contends that it owed no cognizable duty to Carter, and
thus cannot be liable under a negligence theory.
“In order to prove actionable negligence there must be shown
a duty on the part of the person charged with negligence . . . .”
Syl. Pt. 2, Atkinson v. Harman, 158 S.E.2d 169, 171 (W. Va. 1967).
The law provides many sources from which a duty may arise, for
example,
generally

a

statute,
65

C.J.S.

the

common

Negligence
15

law,
§

35

or

public

(2014).

policy.

See

Besides

these

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
traditional sources, West Virginia law also recognizes that a duty
in

tort can

parties.

arise from a “special

relationship”

between

the

See O’Brien v. Quicken Loans, Inc., Nos. 2:12CV5138,

2:12CV5262, 2013 WL 2319248, at *10 (S.D.W. Va. May 28, 2013)
(citing Glascock v. City Nat’l Bank of W. Va., 576 S.E.2d 540, 545
(W. Va. 2002)); see also White v. AAMG Constr. Lending Ctr., 700
S.E.2d 791, 798 (W. Va. 2010) (“[O]ur law allows a negligence claim
for purely economic losses when then [sic] there is evidence of a
‘special relationship’ between the plaintiff and the defendant.”).
“Such special relationship . . . can arise from contractual privity
or other close nexus.”

Aikens v. Debow, 541 S.E.2d 576, 589 (W.

Va. 2000).
Here, Carter alleges that the source of PNC’s duty was a
“special relationship” between the parties.

(Dkt. No. 1-1 at 8)

(“Under the circumstances alleged, in which [PNC] engaged in
significant communications and activities with [Carter] and the
loan thereby creating a special relationship with [Carter], [PNC]
owed a duty to [Carter] . . . .”).

Nevertheless, he concedes that

“there’s not a contract” and that “plaintiff and defendant are not
in

privy

[sic].”

(Dkt. No.

34

at

42).

Thus,

the

special

relationship alleged in the complaint only could have arisen from
16

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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
a “close nexus.” See Aikens, 541 S.E.2d at 590 (internal quotation
marks omitted) (“‘In the absence of contractual privity, its
equivalent

has

been

found

and

a

tort

duty

imposed

when

a

sufficiently close nexus or relationship is shown.’”) (quoting L&P
Converters, Inc. v. Alling & Cory Co., 642 A.2d 264, 267 (Md.
1994)).
The fact that West Virginia’s highest court relied on Maryland
law in crafting its “special relationship” test in Aikens is
noteworthy in light of the Fourth Circuit’s recent application of
the Maryland test in Spaulding v. Wells Fargo Bank, N.A., 714 F.3d
769, 778-80 (4th Cir. 2013).

There, the plaintiffs had alleged

that their loan servicer, Wells Fargo, “owed them a duty to process
their loan modification application.” Id. at 779. The district
court had dismissed the negligence claims, finding that “Wells
Fargo did not owe Plaintiffs a tort duty.”

Id. at 776.

On appeal,

the Fourth Circuit recognized that “[b]anks typically do not have
a fiduciary duty to their customers.”6

Id. at 778.

It noted,

however, that Maryland law, like West Virginia law, recognizes an
exception

when

the

plaintiff

establishes

6

an

“intimate

nexus”

In its analysis, the Fourth Circuit did not distinguish between
loan servicers and loan originators or loan holders.

17

CARTER v. PNC MORTGAGE, INC.

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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
between the parties.

Id. at 779 (citing Jacques v. First Nat’l

Bank of Md., 515 A.2d 756, 759 (Md. 1986)).

In Maryland, the

intimate nexus test is satisfied by “contractual privity or its
equivalent.”
After

Id. (citing Jacques, 515 A.2d at 759-60).

determining

that

the

plaintiffs

lacked contractual

privity with Wells Fargo, the Fourth Circuit evaluated whether
there were other “special circumstances” that gave rise to a quasicontractual relationship.
Court

of

Appeals

has

Id.

It explained that the Maryland

recognized

the

existence

of

special

circumstances where a borrower paid a loan application processing
fee to a lender, the lender made specific promises to the borrower,
and the lender was aware of particularized circumstances concerning
the borrower’s loan application.
A.2d at 756-62).

Id. at 780 (citing Jacques, 515

Contrasting those facts to the facts before it,

the court determined that “[t]he special circumstances in Jacques
. . . are not present here.”

Id. at 779-80.

Ultimately, it held

that “there was no express or implied contract, and therefore, as
the district court concluded, no tort duty could arise as a matter
of law.”

Id.

Federal district courts in West Virginia that have analyzed
the issue

addressed

in

Spaulding
18

have looked

not

to

special

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
circumstances giving rise to an implied contract in determining
whether a tort duty existed, but rather, to whether the plaintiff
alleged that the loan servicer provided services beyond those
normally extant in a borrower-servicer relationship.
McNeely v.

Wells

Fargo Bank,

N.A.,

No.

7005598, at *6 (S.D.W. Va. Dec. 10, 2014);

See, e.g.,

2:13CV25114,

2014

WL

Coleman v. JP Morgan

Chase Bank, N.A., No. 3:14-0183, 2014 WL 1871726, at *9 (S.D.W. Va.
May 8, 2014); O’Brien v. Quicken Loans, Inc., Nos. 2:12CV5138,
2:12CV5262, 2013 WL 2319248, at *10 (S.D.W. Va. May 28, 2013);
Petty v. Countrywide Home Loans, Inc., No. 3:12-6677, 2013 WL
1837932, at *11 (S.D.W. Va. May 1, 2013); Ranson v. Bank of Am.,
N.A., No. 3:12-5616, 2013 WL 1077093, at *5 (S.D.W. Va. Mar. 14,
2013); Nowlan v. JP Morgan Chase Bank, N.A., No. 2:11CV404, 2012 WL
1029315, at *5 (S.D.W. Va. Mar. 26, 2012); Warden v. PHH Mortg.
Corp., No. 3:10CV75, 2010 WL 3720128, at *9 (N.D.W. Va. Sept. 16,
2010) (citing Glascock v. City Nat’l Bank of W. Va., 576 S.E.2d
540, 545-56 (W. Va. 2002)).
Here, the only service allegedly provided by PNC was to review
Carter’s

application

foreclosure.

for

loss

mitigation

alternatives

to

Carter does not allege that a loan servicer’s review

of such applications goes beyond those services normally provided
19

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
to borrowers.

Moreover, at least one case has concluded that

allegations nearly identical to those in Carter’s complaint did not
give rise to a special relationship.

See Ranson, 2013 WL 1077093

at *6 (“There is nothing about these allegations that creates a
‘special relationship’ between the parties.”).
Even if this Court were to adopt the quasi-contract analysis
outlined in Spaulding, its conclusion would not change. There is
still no close nexus between Carter and PNC.

Carter did not pay

PNC any consideration to review his application, and PNC made no
specific promises to Carter.
Nevertheless, at oral argument, Carter’s attorney proposed an
alternative source of the alleged duty, stating:
Servicers, like defendant, are directed by the Rural
Development Agency of the [USDA] to utilize foreclosure
alternatives to the fullest extent possible when
servicing loans that have defaulted or are in imminent
danger of default.
The legal duty is that the Rural
Housing Agency has directed services [sic], who are
contracted out to service these claims, not through a
contract between borrowers and servicers, but through a
special agreement with the [USDA], to engage in extra
special loss mitigation review . . . This is a special
loan where the servicers who are engaged to service these
loans are obligated, because they’ve made agreements with
the [USDA] to treat borrowers differently than other
borrowers.

20

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
(Dkt. No. 34 at 43).

Taking these allegations as true, under the

USDA’s Rural Housing Service directive, PNC was obligated to
conduct a heightened review of Carter’s application for loss
mitigation alternatives to foreclosure.

The question thus is

whether such a directive gives rise to a tort duty flowing between
PNC and Carter.
Notably, in Spaulding, the plaintiffs contended that their
negligence claim was viable because “Wells Fargo owed them a duty
to process their loan modification application under [the United
States

Treasury

Program].”

714

Department’s
F.3d

at

Home

779.

Affordable

Although

the

Modification

Fourth

Circuit

ultimately concluded that the loan servicer owed no duty to the
plaintiffs, it never specifically addressed whether the obligations
imposed by the federal program provided the source of a tort duty
between the servicer and the borrower.
That said, several federal district courts have squarely
addressed the question and have rejected the argument for a variety
of reasons.

In Markle v. HSBC Mortg. Corp. (USA), 844 F. Supp. 2d

172, 184-85 (D. Mass. 2011), for example, the plaintiffs urged that
“they may pursue a common-law claim of negligence for a violation
of [the federal program’s] implementing guidelines,” and that the
21

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
program “establishes a legal duty of care for servicers to comply
with

[its]

argument,

guidelines.”
explaining

The

that

district

court

“[p]laintiffs

do

rejected
not

their

cite

any

Massachusetts authority recognizing a duty of care set by [the
federal program’s] guidelines, the breach of which would expose
servicers to liability.”

Id. at 185.

The court “decline[d] the

invitation to recognize in the [federal program’s] guidelines a new
duty of care, thus far unrecognized by Massachusetts courts.”

Id.

Other courts have rejected the same argument for the reason
that obligations imposed on servicers by federal programs may give
rise to a duty flowing between the servicer and the government, but
not between the servicer and the borrower.

See, e.g., Gamez v.

Wells Fargo Bank, N.A., No. 4:11CV919, 2013 WL 960464, at *4 (S.D.
Tex. Mar. 12, 2013) (“Although this argument provides a basis for
finding obligations to the U.S. Government, it does not provide one
for finding a legally actionable duty of care owed to borrowers.”).
Still other courts have rejected the argument because the
federal program did not provide the borrower with a private right
of

action,

and

because

the

borrowers

were

not

third

party

beneficiaries under the federal program. See, e.g., Dixon v. Wells
Fargo Bank, N.A., No. 12-10174, 2012 WL 4450502, at *9 (E.D. Mich.
22

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
Sept. 25, 2012) (“[O]ther than their reliance on the [federal
program] contracts, of which Plaintiffs’ [sic] are not intended
beneficiaries, Plaintiffs have failed to suggest any duty that
Wells Fargo may have owed them . . . .

Accordingly, their

negligence claim must be dismissed.”).
These decisions demonstrate that, even if the USDA’s Rural
Housing Service required PNC to review Carter’s application with
heightened care, such a requirement does not give rise to a tort
duty owed by PNC to Carter.

The Court therefore concludes that

Carter’s negligence claim should be dismissed because he has failed
to establish a duty owed to him by PNC.
E.

Fraud
In his fraud claim, Carter alleges that PNC “represented to

[him] that non-payment was necessary to receive assistance and that
[PNC] could only consider and/or [sic] [him] for loss mitigation
assistance so long as [he] avoided making any payments.” (Dkt. No.
1-1 at 11).

He further alleges that, in reliance on PNC’s

representations, he “did not make payment toward the subject
mortgage loan,” and “had a reasonable expectation that [PNC] would
appropriately review [him] for and/or provide [him] with loss

23

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
mitigation assistance.” Id. Finally, he states he “was injured by
his reliance of [PNC’s] representations.”

Id.

PNC argues that Carter has failed to plead his fraud claim
with the requisite particularity.

Carter rebuts this by pointing

to specific allegations in his complaint that he contends satisfy
the particularity requirement.

PNC did not press the issue in its

reply brief or at oral argument.
Rule 9(b) of the Federal Rules of Civil Procedure requires
parties

alleging

fraud

to

“state

with

particularity

the

circumstances constituting fraud.” “[T]he ‘circumstances’ required
to be pled with particularity under Rule 9(b) are ‘the time, place,
and contents of the false representations, as well as the identity
of the person making the misrepresentation and what he obtained
thereby.’”

Harrison v. Westinghouse Savannah River Co., 176 F.3d

776, 784 (4th Cir. 1999) (quoting 5 Charles Alan Wright and Arthur
R. Miller, Federal Practice and Procedure: Civil § 1297, at 590 (2d
ed.

1990)).

Importantly,

the

Fourth

Circuit

has

instructed

district courts to “hesitate” in dismissing a fraud claim under
Rule 9(b) if satisfied “(1) that the defendant has been made aware
of the particular circumstances for which she will have to prepare

24

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
a

defense

at

trial,

and

(2)

that

plaintiff

prediscovery evidence of those facts.”

has

substantial

Id.

Here, Carter has alleged that PNC’s agents misrepresented to
him that it was necessary to stop making payments in order to be
considered for loss mitigation alternatives to foreclosure.

These

communications allegedly originated from PNC’s place of business
and occurred between May 2013 and early 2014.

Clearly, PNC is on

notice of the circumstances surrounding the alleged fraud, and
Carter,

as

the

communications

purported

victim

allegedly sent by

of

PNC.

the

fraud,

Based on

has

this,

the
PNC’s

argument that Carter’s fraud claim is insufficiently pled is
without merit.
V. CONCLUSION
For the reasons discussed, the Court GRANTS IN PART and DENIES
IN PART PNC’s motion for judgment on the pleadings.

In so doing,

it DISMISSES WITH PREJUDICE Carter’s claim under the WVCCPA (Count
I) and his negligence claim (Count II).
claims

for

tortious

interference

Carter may proceed on his

with

estoppel (Count IV), and fraud (Count V).

contract

(Count

III),

To the extent PNC has

not moved to dismiss Carter’s alternative claim for breach of
contract (Count VI), it remains viable.
25

CARTER v. PNC MORTGAGE, INC.

1:14CV70

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS,
AND DISMISSING WITH PREJUDICE COUNTS I AND II
It is so ORDERED.
The

Court

directs

the

Clerk

to transmit

copies

of

Memorandum Opinion and Order to counsel of record.
DATED: March 3, 2015.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE

26

this